Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Traders Fear That The Rally Is All Bull

Stock-Markets / Financial Markets 2009 May 21, 2009 - 05:11 AM GMT

By: PaddyPowerTrader

Stock-Markets

Best Financial Markets Analysis ArticleA cautious set of Federal Reserve minutes gave the market pause for thought yesterday evening as they downgraded their growth forecast and warned in sober tones of a slow recovery on the jobs front. These factors point to a longer period of ZIRP and more QE. Other headwinds for the market came in the form of crude oil, which popped back above $62 a barrel on an unexpected decline in inventories as gold chugs ever higher ($900).


The stock market rally is now being driven by the same force that set up the excesses that led to the bust in the first place – an abundance of liquidity. The world is awash with government money, both central bank “quantitative easing” (money printing) and budgetary stimulus, and this is, in turn, driving a re-run of the hedge fund speculation that popped the market in 2007. You can’t drink yourself sober.

Today’s Market Moving Stories

  • Overnight we got news of Japan’s tertiary industry index, Mar: The economy remains under pressure as service-sector activity fell by 4%, which was the biggest fall since 1997.
  • UK: The International Monetary Fund warns that the “success of the current policy package hinges on the continued trust in the sustainability of the fiscal position.” It adds: “The focus of this adjustment profile should be to put public debt on a firmly downward path faster than envisaged in the 2009 Budget.” It calls for the government to specify how it plans to limit public spending, to allocate any surprise tax revenue growth to deficit reduction and to build a broad public consensus for bringing the government books closer to balance.

    The fund notes that it favours cutting spending plans rather than tax increases to improve the public finances, because the fund believes that evidence from Canada, Australia and Denmark shows lower public spending is the more durable policy. The fund also notes: “The financial system may not yet be repaired to a level where banks are ready to increase lending sufficiently to underpin a strong recovery. Although banks are expected to continue to remain above minimum regulatory capital requirements, further shocks will lead to an erosion of capital buffers.” It adds that the Government must encourage banks to raise more capital, and to “stand ready to provide

  • Confederation of British Industry President Martin Broughton says that the recent budget represented a “serious failure” to come to grips with the country’s fiscal challenge. He adds that “it is the time to develop credible plans to get the deficit under control and bring back stability in the medium term.” He adds that the use of “heroic growth assumptions” in the budget “amounted to a serious failure to address the deficit in a way that gives confidence to buyers of our public debt.”
  • Ryanair called on Aer Lingus to cut the salaries of its Chairman and its directors due to the airline’s ’stated need to significantly reduce costs’.
  • Good to know that Uncle Sam’s tax Dollar’s are being wisely spent and that someone is minding the shop.
  • The spectre of terror returns to haunt us.
  • Is Dr Doom Prof Nouriel Roubini lucky or just good?
  • Proof of what many hapless investor knows to their cost. Jim Kramer is a lousy stock picker.
  • Fancy a modest pad in New York?

Merrill Lynch Fund Manager’s Survey Results
The key results kind of support my point that the Emerging Markets are seriously overbought and ripe for some profit taking. May survey of 220 investors with $617bn assets under management showed a surge in macro and market optimism but not to extreme levels and argues for market consolidation rather than sell.

Four data points to illustrate optimism:

  • 57% see stronger global economy - highest since Feb 2004.
  • First positive reading for profit expectations since 2005, more than 1/4 of survey thinks +10% profit growth next 12 months.
  • Cash balances down to much more normal level of 4.3% (from 4.9% last month and a recent peak of 5.5% Nov/Dec).
  • Top three global sectors are technology, energy and materials. Big reduction in exposure to pharma, staples and utilities.

The main conclusions are:

  • Pain trade no longer up. Apocalyptic bearishness of March has vanished, investor positioning is more balanced and more cyclical.
  • Outside of Emerging Markets/China where there are signs of irrational exuberance, optimism is not extreme, i.e. it argues for consolidation rather than a “Sell in May”.
  • The uber-contrarian would buy telco and sell tech, buy Japan and sell China.

Dollar Bears In The Ascendancy
The USD has been coming under growing pressure for some time against the background of improving risk appetite and overnight it was given a further push from the minutes of the 28-29 April FOMC meeting. The USD index plunged close to 5-month lows and remains vulnerable to further selling. There was always a risk that a Fed discussion about increasing Treasury purchases would play negatively for the USD given the 4% drop in the USD when the Fed initially announced its Treasury purchase programme. In the event, the minutes did just that, with some members highlighting that the Fed may need to step up Treasury purchases “to spur a more rapid pace of recovery”.

In addition, the Fed revised down its growth outlook and revised up its estimates of the increase in the unemployment rate whilst noting that economic recovery will be gradual in the years ahead. The FOMC minutes resulted in some disconnect between equities, which erased earlier gains to close lower, and the USD which slid further. Bonds were supported, however. Equity markets also did not take too well to the warnings from American Express that new US legislation to curb credit card fees may also reduce lending to “consumers who need it”. Although this may just be sour grapes from credit card companies, one of the restraints to recovery remains tight lending standards and if the new legislation results in tighter lending conditions, it will add to the difficulties in obtaining financing and in turn restrict spending.

The Day Ahead
With holidays in some parts of Europe today (depending on your religion), flows should be lighter than usual. It’s also a ½ day in the US tomorrow and a bank holiday in the UK on Monday.

UK retail sales for April are out at 09:30. Sales should be up a further 0.3% in April, putting annual growth at 2.3%, although note that it is hard to seasonally adjust the numbers for the impact of Easter. At the same time, UK public finances are released and they should show that the finances are getting worse as revenues fall and spending overshoots projections. We expect a cash deficit of £2.5bn and an accruals deficit of £7bn.

At 15:00, US leading indicators should jump by 1.1%, the largest rise since 2005, boosted by equities, consumer expectations and the yield curve. Then at 15:00 the U.S. Philadelphia Fed survey is due. Manufacturing should contract at a slower rate, improving further to -18, up from the recent low of -41.

And Finally…

Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

alistair cameron
05 Nov 09, 06:42
stop loss orders

I would just like to say that i am continually amazed by the amount of misinformation and disinformation fed by the investment media to the gullible masses .Surely the only thing that is important when trading stock is that the stock is liquid , the level of risk exposure is mitigated and that the investor himself truly knows what really drives market prices , which is supply and demand .

Thank you

A Cameron

Private Retail Stock Investor .


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules